OFFICIALLD0CMENTS I

ORIGINAL GRANT NUMBER H547-LAADDITIONAL FINANCING GRANT NUMBER H789-LA

Financing Agreement

(Amending and Restating Financing Agreement and Providing AdditionalFinancing for the Road Sector Project)

between

LAO PEOPLE'S DEMOCRATIC REPUBLIC

and

INTERNATIONAL DEVELOPMENT ASSOCIATION

Dated ,qU3CS / 8 , 2012

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FINANCING AGREEMENT

AGREEMENT dated é7Ugu5f 8 , 2012, entered into between LAOPEOPLE'S DEMOCRATIC REPUBLIC ("Recipient") and INTERNATIONALDEVELOPMENT ASSOCIATION ("Association").

WHEREAS: (A) under an agreement dated April 2, 2010, between the Recipientand the Association ("Original Financing Agreement"), the Association agreed to providethe Recipient with a grant in an amount equivalent to seventeen million nine hundredthousand Special Drawing Rights (SDR 17,900,000) ("Original Financing") on the termsand conditions set forth or referred to in the Original Financing Agreement;

(B) the Recipient has requested the Association to provide further additionalfinancial assistance in the support of the Project by increasing the amount of the Grantmade available under the Original Financing Agreement by an amount in variouscurrencies equivalent to fourteen million Special Drawing Rights (SDR14,000,000) (the"Additional Grant"); and

(C) the Association has agreed, on the basis, inter alia, of the foregoing, toprovide such additional assistance to the Recipient and to amend the Original FinancingAgreement upon the terms and conditions set forth in this Agreement.

NOW THEREFORE the Recipient and the Association hereby agree to amendand restate the Original Financing Agreement to read as follows:

ARTICLE I — GENERAL CONDITIONS; DEFINITIONS

1.01. The General Conditions (as defined in the Appendix to this Agreement)constitute an integral part of this Agreement.

1.02. Unless the context requires otherwise, the capitalized terms used in thisAgreement have the meanings ascribed to them in the Preamble to thisAgreement, in the General Conditions or in the Appendix to this Agreement.

ARTICLE II — FINANCING

2.01. The Association agrees to extend to the Recipient, on the terms and conditionsset forth or referred to in this Agreement, the'following amounts to assist infinancing the Project described in Schedule 1 to this Agreement ("Project"):

(a) an Original Grant in amount in various currencies equivalent toseventeen million nine hundred thousand Special Drawing Rights(SDR 17,900,000); and

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(b) an Additional Grant in amount in various currencies equivalent tofourteen million Special Drawing Rights (SDR 14,000,000).

2.02. The Recipient may withdraw the proceeds of the Financing in accordance withSection IV of Schedule 2 to this Agreement.

2.03. The Maximum Commitment Charge Rate payable by the Recipient on theUnwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) perannum.

2.04. The Payment Dates are February 15 and August 15 in each year.

2.05. The Payment Currency is Dollars.

ARTICLE III — PROJECT

3.01. The Recipient declares its commitment to the objectives of the Project. To thisend, the Recipient shall carry out the Project through MPWT in accordance withthe provisions of Article IV of the General Conditions.

3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, andexcept as the Recipient and the Association shall otherwise agree, the Recipientshall ensure that the Project is carried out in accordance with the provisions ofSchedule 2 to this Agreement.

ARTICLE IV — EFFECTIVENESS; TERMINATION

4.01. The Effectiveness Deadline is the date ninety (90) days after the date of thisAgreement.

4.02. For purposes of Section 8.05(b) of the General Conditions, the date on which theobligations of the Recipient under this Agreement (other than those providing forpayment obligations) shall terminate is twenty (20) years after the date of thisAgreement.

ARTICLE V — REPRESENTATIVE; ADDRESSES

5.01. The Recipient's Representative is the Minister of Finance.

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5.02. The Recipient's Address is:

Ministry of Finance23`d Singha RoadSaysettha DistrictVientianeLao PDR

Facsimile: 856-21-412142

5.03. The Association's Address is:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable: Telex: Facsimile:

INDEVAS 248423 (MCI) 1-202-477-6391Washington, D.C.

AGREED at , as of the day and year first above written.

LAO PEOPLE'S DEMOCRATIC REPUBLIC

By:Authorized Representative

Name: Sar'itlphab PHOMV iANrE.Title: Vi(!L MiVIISfer of HCL4I(^

INTERNATIONAL DEVELOPMENT ASSOCIATION

By: /4 (LA RepresentativeRe resentative

Name:

Title:

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SCHEDULE 1

Project Description

The objectives of the Project are: (a) to improve road services on two (2) mainnational corridors and the provincial road network; (b) to rehabilitate roads damaged byTyphoon Ketsana; and (c) to establish and operationalize a contingency fund for quickdisaster response in the road sector.

The Project consists of the following parts:

Part 1. Road Network Improvement and Preservation

(a) Upgrading the National Roads to sealed and better disaster-resilientstandards, including: (i) the acquisition of land and carrying out ofresettlements needed to upgrade the National Roads; (ii) managing,supervising and monitoring the construction contracts to upgrade theNational Roads; (iii) constructing a bridge over the River Ma (Nam Ma)connecting the National Roads, and (iv) the managing, supervising andmonitoring the construction contract to construct said bridge.

(b) Supporting the Recipient's road maintenance program by: (i) carryingout periodic maintenance on priority sections of a provincial roadnetwork as identified in annual work plan which include, inter alia,enhanced standards for disaster resilience; and (ii) managing, supervisingand monitoring implementation of said program.

(c) Supporting the implementation of the National Road Safety Strategy andAction Plan through, inter alia: (i) the acquisition and installation of roadsafety related goods; (ii) strengthening coordination and managementcapacities at central and local levels; (iii) strengthening provincial anddistrict capacity for traffic management and road safety planning; and(iv) strengthening accident prevention and enforcement of safety rules.

Part 2. Institutional Strengthening

(a) Strengthening the institutional capacity of the Recipient's transportsector at the national level by: (i) improving strategic transport sectormanagement, and planning capacity including, inter alia, in thedevelopment of public private partnerships for road transport sectordevelopment; and (ii) improving strategic road network development andmanagement capacity at both central and local levels, including, interalia, information and communication technology development, roadcondition data collection, construction unit costs analysis and fiduciarycapacities.

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(b) Strengthening the Recipient's capacity to carry out effectiveimplementation of the ESOM and the Compensation and ResettlementDecree, including its technical guidelines and procedures.

(c) Strengthening MPWT's internal control capacity on road infrastructureinvestments by, inter alia: (i) developing and implementing an internalaudit program and an internal control and accountability framework; (ii)carrying out independent technical and financial audits and inspections;and (iii) development of communications channels between the generalpublic and MPWT and DPWTs.

(d) Strengthening (i) the institutional capacity of the Recipient's transportsector through Training and Workshops on strategic management atcentral level; and (ii) the operational capacities of provincial and locallevels in the areas, inter alia, of: contract management, financialmanagement, and procurement, and safeguard compliance andmonitoring.

Part 3. Disaster Recovery and Contingency

(a) Rehabilitating roads damaged by Typhoon Ketsana located in selectedsouthern provinces of the Recipient, including engineering andsupervision support needed for carrying out said rehabilitation work.

(b) Assisting the Recipient in developing and implementing a disasterresponse to ensure passability and safety of affected national andprovincial road networks following the occurrence of a natural disasterthrough the provision of Eligible Goods and Works, including repair ofroads and bridges damaged by disasters, the accompanying supervisioncost and Incremental Operating Costs as described in Schedule 3 of thisAgreement.

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SCHEDULE 2

Project Execution

Section I. Implementation Arrangements

A. Institutional Arrangements

The Recipient shall maintain, throughout the period of implementation of theProject, the Road Maintenance Fund Advisory Board and its secretariat, withsufficient resources, appropriately qualified and competent staff in adequatenumbers with terms of reference satisfactory to the Association. The Secretariatof the Road Maintenance Fund Advisory Board shall be vested with financialmanagement responsibility under Part 1(b)(i) of the Project.

2. The Recipient shall maintain within MPWT, throughout the period ofimplementation of the Project, the DPC, with sufficient resources, appropriatelyqualified and competent staff in adequate numbers with terms of referencesatisfactory to the Association, responsible for carrying out the management,coordination and monitoring of all activities and implementing entities under theproject.

The Recipient shall through MPWT:

(a) implement the Financial Management Manual which includes, inter alia:(i) financial management and disbursement procedures consistent withthe provisions of Section II.B of Schedule 2 to this Agreement;(ii) the measures to strengthen the internal controls and accountability;and (iii) the financial management and disbursement arrangements forPart 3 of the Project; and

(b) not amend, suspend, abrogate, repeal and waive any provisions of theFinancial Management Manual without the prior written agreement ofthe Association.

4. The Recipient shall, during implementation of the Project, take all such actions asshall be necessary to increase the revenue basis for the RMF, includingmaintaining levies on motor vehicle fuel to a level of not less than four hundred(400) Kip per liter.

In carrying out Part 1(b)(i) of the Project, the Recipient shall, through MPWT, byMarch 1 of each calendar year, commencing on March 1, 2011, prepare, underterms of reference satisfactory to the Association, and submit to the Association,for its review and comments: (i) a draft annual work program for road and bridgepreservation covering the provincial road networks; and (ii) a three-year rolling

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preservation plan, and thereafter carry out such program and plan, taking intoaccount the Association's comments thereon.

The Recipient shall carry out three (3) updates of the National TransportStrategic Plan, including a medium-term expenditure program, whose substanceshall be satisfactory to the Association. The first such update shall be carried outno later than June 30, 2011, the second update shall be carried out no later thanJune 30, 2013, and the third update shall be carried out no later than June 30,2016.

7. The Recipient shall, by no later than three (3) months after the Effective Date ofthis Agreement, engage an internal audit consultant for the purposes of buildingaudit capacity, with appropriate experience and qualifications, and under terms ofreference acceptable to the Association.

B. Anti-Corruption

The Recipient shall ensure that the Project is carried out in accordance with theprovisions of the Anti-Corruption Guidelines.

C. Safeguards

In order to ensure the proper implementation of the Project in an environmentallyand socially sound manner, the Recipient shall implement the Project inaccordance with the SGDR including the ESOM, the RAPs, the EGDPs, the RPF,the EGDF, the Environmental Legislation and the provisions of this Agreement.

2. If at any time the Environmental Legislation is proposed to be modified, theRecipient shall, prior to such modification, inform the Association of, and consultwith it on, such proposal; and if in the opinion of the Association the applicationof any such .aspect of such proposal would result in adverse environmentalimpacts under the Project, the Recipient shall continue to carry out the Project inaccordance with the provisions of the SGDR or such other environmentalguidelines as shall have been determined by the Recipient and agreed to inwriting by the Association.

3. When conducting any environmental impact assessment required under theEnvironmental Legislation for activities proposed for inclusion under the Project,the Recipient shall ensure that:

(a) the guidelines described in the ESOM, consistent with the EnvironmentalLegislation, are applied so that the impacts of these activities on theenvironment are properly analyzed, including consideration foralternatives to any proposed activities to enable the Recipient to comparethe feasibility of each alternative under local conditions;

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(b) mitigation measures or an EMP are prepared for the activities inaccordance with the principles set out in the ESOM, as appropriate,including budget, institutional and human resources to be provided forsuch activities; and

(c) procedures for chance finds of cultural property are clearly outlined inthe EMP.

4. The Recipient shall refrain from carrying out any Project activity that shall resultin the involuntary resettlement or adverse impacts on livelihoods, as aconsequence of the Project activities, of persons or communities residing in theProject areas and neighborhoods, all as defined in the RPF; provided that if suchimpact or resettlement would be unavoidable, the Recipient shall implement suchactivity only after it has consulted with potentially Displaced Persons inaccordance with the provisions of the RPF, and prepared, adopted andimplemented a resettlement action plan as appropriate in accordance with theRPF, all with the prior written approval of the Association.

The Recipient shall, in the context of the reports referred to in Section II.A.1 ofthis Schedule, prepare and provide to the Association, for its review, reports onthe application of the provisions of the SGDR and ESOM to Project activities,and shall thereafter carry out the recommendations of such reports, taking intoaccount the Association's comments thereon, all with a view to complying withthe SGDR, the ESOM, the RPF and the EGDF.

6. Without limitation to the obligations set forth above, the Recipient shall, andshall cause DPWTs and OPWTs, in carrying out the activities under Part 1(b)(i)of the Project:

(a) at least sixty (60) days prior to the initiation of any works, publiclydisseminate to the relevant local population the ESOM, the RPF and theEGDF, in form and substance acceptable to the Association; and

(b) prior to the start of any work under such Part of the Project, undertakethe required environmental and social actions under this Agreement, andprovide compensation, resettlement and rehabilitation entitlements to theDisplaced Persons in accordance with the RAPs and RPF.

Section II. Project Monitoring, Reporting and Evaluation

A. Project Reports

The Recipient shall monitor and evaluate the progress of the Project and prepareProject Reports in accordance with the provisions of Section 4.08 of the General

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Conditions and on the basis of the indicators agreed with the Association. EachProject Report shall cover the period of one (1) calendar semester, and shall befurnished to the Association not later than forty five (45) days after the end of theperiod covered by such report.

B. Financial Management, Financial Reports and Audits

The Recipient shall maintain or cause to be maintained a financial managementsystem in accordance with the provisions of Section 4.09 of the GeneralConditions.

2. The Recipient shall prepare and furnish to the Association not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financialreports for the Project covering the quarter, in form and substance satisfactory tothe Association.

The Recipient shall have its Financial Statements audited in accordance with theprovisions of Section 4.09(b) of the General Conditions. Each audit of theFinancial Statements shall cover the period of one (1) fiscal year of the Recipient.The audited Financial Statements for each such period shall be furnished to theAssociation not later than six (6) months after the end of such period.

Section III. Procurement

A. General

Goods, Works and Non-consulting Services. All goods, works and non-consulting services required for the Project and to be financed out of the proceedsof the Financing shall be procured in accordance with the requirements set forthor referred to in Section I of the Procurement Guidelines, and with the provisionsof this Section; provided however that goods, works and non-consulting servicesfor which the procurement process was initiated under the Original FinancingAgreement prior to the Effective Date of this restated Agreement, may beprocured in accordance with the requirements set forth or referred to in Section Iof the "Guidelines: Procurement under IBRD Loans and IDA Credits" publishedby the Association in May 2004 and revised in October 2006.

2. Consultants' Services. All consultants' services required for the Project and tobe financed out of the proceeds of the Financing shall be procured in accordancewith the requirements set forth or referred to in Sections I and IV of theConsultant Guidelines, and with the provisions of this Section; provided howeverthat consultants' services for which the procurement process was initiated underthe Original Financing Agreement prior to the Effective Date of this restatedAgreement may be procured in accordance with the requirements set forth or

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referred to in Section I and IV of the "Guidelines: Selection and Employment ofConsultants by World Bank Borrowers" published by the Association in May2004 and revised in October 2006.

Definitions. The capitalized terms used below in this Section to describeparticular procurement methods or methods of review by the Association ofparticular contracts, refer to the corresponding method described in Sections IIand III of the Procurement Guidelines, or Sections II, III, IV and V of theConsultant Guidelines, as the case may be.

B. Particular Methods of Procurement of Goods, Works and Non-consultantServices

International Competitive Bidding. Except as otherwise provided inparagraph 2 below, goods, works and non-consulting services shall be procuredunder contracts awarded on the basis of International Competitive Bidding.

2. Other Methods of Procurement of Goods Works and Non-consultantServices. The following table specifies the methods of procurement, other thanInternational Competitive Bidding, which may be used for goods, works andnon-consulting services. The Procurement Plan shall specify the circumstancesunder which such methods may be used:

Procurement Methods(a) National Competitive Bidding in accordance with the Recipient's

Decree of the Prime Minister on Government Procurement of Goods,Construction, Maintenance and Services, 03/PM dated January 9, 2004,and the Implementing Rules and Regulations on GovernmentProcurement of Goods, Works, Maintenance and Services, 0861/MOF,dated May 5, 2009, and subject further to the procedures listed in Annex2 to this Schedule 2

(b) Shopping(c) Direct Contracting for goods or works under Part 3 of the Project(d) Force Account for works under Part 3 of the Project

C. Particular Methods of Procurement of Consultants' Services

Quality- and Cost-based Selection. Except as otherwise provided inparagraph 2 below, consultants' services shall be procured under contractsawarded on the basis of Quality- and Cost-based Selection.

2. Other Methods of Procurement of Consultants' Services. The following tablespecifies methods of procurement, other than Quality- and Cost-based Selection,

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which may be used for consultants' services. The Procurement Plan shall specifythe circumstances under which such methods may be used.

Procurement Methods

(a) Selection Based on Consultants' Qualifications(b) Least-Cost Selection(c) Single Source Selection(d) Selection of Individual Consultants(e) Sole Source Basis for the Selection of Individual Consultants(f) Quality-based Selection

D. Review by the Association of Procurement Decisions

The Procurement Plan shall set forth those contracts which shall be subject to theAssociation's Prior Review. All other contracts shall be subject to Post Reviewby the Association.

Section IV. Withdrawal of the Proceeds of the Financing

A. General

The Recipient may withdraw the proceeds of the Original Financing and of theAdditional Financing in accordance with the provisions of Article II of theGeneral Conditions, this Section, and such additional instructions as theAssociation shall specify by notice to the Recipient (including the "World BankDisbursement Guidelines for Projects" dated May 2006, as revised from time totime by the Association and as made applicable to this Agreement pursuant tosuch instructions), to finance Eligible Expenditures as set forth in the table inparagraph 2 below.

The following table specifies the categories of Eligible Expenditures that may befinanced out of the proceeds of the Original Financing and of the AdditionalFinancing ("Category"), the allocations of the amounts of the Financing to eachCategory, and the percentage of expenditures to be financed for EligibleExpenditures in each Category:

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PercentageAmount of Amount of the of

the Original Additional ExpendituresFinancing Financing to beAllocated Allocated Financed

(expressed in (expressed (inclusive ofCategory SDR) SDR) Taxes)

(1) Works

(a) under Part 1(a) except for Part 6,591,000 6,800,000 70%1(a)(i) of the Project

(b) under Part 1(b) except for Part 1,932,000 2,000,000 25%1(b)(ii) of the Project

(c) under Part 3(a) of the Project 4,367,100 180,000 100%

(2) Consultants' services, goods 2,500,000 - 100%and Incremental Operating Costs,for Part 1, Parts 2 (a)(ii), 2(b) and2(c) and Part 3(a) of the Project

(3) Eligible Goods and Works, 2,509,900 1,060,000 100%Consultants' services, andIncremental Operating Costsunder Part 3(b) of the Project

(4) Consultants' services, goods - 3,960,000 100%Incremental Operating Costs, andTraining and Workshop for Part 1,Part 2 and Part 3(a) of the Project

TOTAL AMOUNT 17,900,000 14,000,000

B. Withdrawal Conditions; Withdrawal Period

Notwithstanding the provisions of Part A of this Section, no withdrawal of theAdditional Financing shall be made for payments made prior to the date of thisAgreement.

2. The Closing Date is September 30, 2017.

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ANNEX 1to

SCHEDULE 2

National Competitive Bidding Procedures

Bidding documents and contracts under national competitive bidding proceduresfinanced by the Association shall include a provision requiring supplierscontractors and their subcontractors to permit the Association to inspect theiraccounts and records relating to the bid submission and the performance of thesupplier and/or contractor, as the case may be, and to have them audited byauditors appointed by the Association, if so required by the Association. Thedeliberate and material violation by the supplier, contractor or subcontractor ofsuch provision may amount to obstructive practice.

Immediately after completion of the bid opening proceedings, a copy of the bidopening record shall be posted at a prominent location, accessible to the public,outside the office of the concerned procuring entity and shall be retained at thesame location until the award of contract has been notified. A copy of the bidopening record shall be provided to all bidders who submitted bids.

The Recipient shall publish the following information on contract award on a freeor open access website when it becomes operational or on another means ofpublication acceptable to the Association: (a) name of each bidder who submitteda bid; (b) bid prices as read out at bid opening; (c) name and evaluated price ofeach bid that was evaluated; (d) name of bidders whose bid were rejected and thereasons for rejection; (e) name of the winning bidder, contract price, explanationif it is different that bid price as well as the duration and summary scope of thecontract awarded; and (f) contract variation orders. This publication shall beupdated quarterly.

4. The eligibility of bidders shall be as defined under section I of the ProcurementGuidelines; accordingly, a firm or individual previously declared ineligible bythe Association based on determination by the Association that this firm orindividual has engaged in corrupt, fraudulent, collusive, coercive or obstructivepractices shall be declared ineligible to be awarded a contract financed byAssociation.

The Association shall declare a firm or individual ineligible, either indefinitely orfor a stated period, to be awarded a contract financed by the Association and theRecipient, if it at any time determines that the firm or individual has, directly orthrough an agent, engaged in corrupt, fraudulent, collusive, coercive orobstructive practices in competing for, or in executing, an Association-financedcontract.

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Eligible Goods and Works

1. Goods include, inter alia, construction materials, such as cement, steel, quarries,gravel, asphalt, pre-cast construction materials and sandbags.

2. Works include, inter alia, removing landslides, constructing temporary bypasses,filling collapsed sections, extending culverts, repair of roads and bridgesdamaged by disasters, the accompanying supervision cost and IncrementalOperating Costs.

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APPENDIX

Section I. Definitions

"Anti-Corruption Guidelines" means the "Guidelines on Preventing andCombating Fraud and Corruption in Projects Financed by IBRD Loans and IDACredits and Grants", dated October 15, 2006 and revised in January 2011.

2. "Category" means a category set forth in the table in Section IV of Schedule 2 tothis Agreement.

"Co-financier" means the Japan Policy and Human Resources DevelopmentFund, referred to in paragraph 10 of the Appendix to the General Conditions.

4. "Co-financing" means an amount approximately equivalent to one millionDollars ($1,000,000), to be provided by the Co-financier to assist in the financingof Parts 2(a)(i) and 2(d) of the Project.

5. "Co-financing Agreement" means the agreement to be entered into between theRecipient and the Association acting as administrator of the Co-financing.

6. "Compensation and Resettlement Decree" means the decree issued by theRecipient on July 7, 2005, including the regulation implementing such decree,which sets out principles, procedures and guidelines for carrying outcompensation and resettlement process within the territory of the Recipient.

"Consultant Guidelines" means the "Guidelines: Selection and Employment ofConsultants under IBRD Loans and IDA Credits and Grants by World BankBorrowers" dated January 2011.

"Displaced Person" means a person, a group of persons or a community asreferred to in the RPF, who, on account of the execution of the Project,experiences direct adverse economic and social impacts caused by: (a) theinvoluntary taking of land resulting in (i) relocation or loss of shelter (ii) loss ofassets or access to assets, totally or partially; or (iii) loss of income sources ormeans of livelihood, whether or not such person must move to another location;or (b) the restriction to access to the natural resources of protected areasresulting in adverse impacts on the livelihood of a person, group of persons orcommunities, and Displaced persons means more than one Displaced Person.

9. "DPC" means the Department of Planning and Cooperation of the Recipient'sMinistry of Public Works and Transport, or any successor thereto, responsible forstrategic planning, capacity building planning and monitoring related to theProject.

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10. "DPWTs" means the Provincial Departments of Public Works and Transport orany successors thereto, and "DPWT" means any of the Provincial Departments ofPublic Works and Transport.

11. "Eligible Goods and Works" means all the eligible Goods and Works, listed inSchedule 3 of this Agreement, needed to ensure passability and safety of affectednational and provincial roads when a national or provincial state of emergencyhas been declared in accordance with the terms set forth in Schedule 3 to thisAgreement.

12. "Environmental Assessment" and the acronym "EA" mean an environmentalassessment, acceptable to the Association, prepared by the Recipient inaccordance with the Recipient's Environmental Legislation described in theSGDR and the ESOM, evaluating the environmental impact of Project activitiesand setting forth the mitigating, institutional, and monitoring measures foractivities undertaken under the Project.

13. "Environmental Legislation" means the Recipient's set of laws, decrees,regulations or ministerial decisions, including the Decree on EnvironmentalImpact Assessment (No. 112 PM) approved on February 16, 2010, the forms to beused for the purpose of processing and documenting environmental assessment ofthe Project activities described in Annex B of the SGDR and the ESOM,including, but not limited to legislation, decrees and relevant implementingregulations applicable to environmental impact assessments, natural habitats andphysical cultural resources, and all secondary legislation related thereto.

14. "EMP" means collectively, the two (2) Recipient's Environmental ManagementPlans, one (1) for each National Road, dated February 2009, and the Recipient'sEnvironmental Management Plan for the bridge over the River Ma (Nam Ma)dated June 4, 2012 prepared as appropriate for Project activities in accordancewith the SGDR, ESOM and the Environmental Legislation and referred to inSection I.C.3(a) of Schedule 2 to this Agreement, as such EMP may be modifiedfrom time to time with the prior written agreement of the Association and theRecipient.

15. "ESOM" means the Recipient's Environmental and Social Operations Manual,dated November 28, 2009, attached to the SGDR and describing: (i) the overalllegal and regulatory framework and guidelines for social and environmentalimpact assessment and mitigation measures applicable to the Project; (ii) theenvironmental analysis of the Project components; (iii) the EA processes appliedby the MPTW including implementation of mitigation measures,(iv) environmental supervision and monitoring; (v) training and capacitystrengthening; and (vi) budget allocation for addressing environmental and socialimpacts under the Project, all of which shall be applied to Project activities

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consistent with the Environmental Legislation and as the same may be amendedfrom time to time with the prior concurrence of the Association.

16. "Ethnic Group Development Framework" and the acronym "EGDF" mean theRecipient's Ethnic Group Development Framework acceptable to theAssociation, dated August 17, 2009 and updated in April, 2012, adopted by theRecipient, and giving details of the rules, guidelines and procedures needed to:(a) involve Ethnic Minorities, through a process of informed consultation, in thedesign and implementation of the Project in locations in which such people resideor make their living; and (b) design and implement measures to provide benefitswhich are socially and culturally acceptable to them, and reduce, mitigate andoffset adverse impacts of the Project, as such Ethnic Group DevelopmentFramework may be amended from time to time with the prior agreement of theAssociation.

17. "Ethnic Group Development Plans" and the acronym "EGDP" mean,collectively, the two (2) ethnic group development plans prepared by theRecipient for the Project, all dated August 17, 2009, which are acceptable to theAssociation and consistent with the Ethnic Group Development Framework,giving details of the specific actions, measures and policies designed to facilitatethe achievement of the objectives of the Ethnic Group Development Framework,along with the procedural and institutional measures needed to implement suchactions, measures and policies.

18. "Financial Management Manual" means the manual adopted by the Recipient onJune 18, 2010, setting forth, inter alia, the financial management arrangementsand procedures for the Project including the flow of funds, accounting policy andprocedures, budgeting, recording, financial reporting, auditing and disbursementarrangements; as such manual may be amended from time to time by agreementbetween the Recipient and the Association.

19. "General Conditions" means the "International Development AssociationGeneral Conditions for Credits and Grants", dated July 31, 2010.

20. "Governor" means the Governor of a province of the Lao People's DemocraticRepublic.

21. "Incremental Operating Costs" mean reasonable expenditures directly related tothe Project incurred by the Recipient (which expenditures would not have beenincurred absent the Project), including maintenance of vehicles, expenditures forProject staff travel and per diem, office supplies, communications services(including telephone and internet costs), publication services, translationservices, and maintenance of office equipment, but excluding salaries of officialsof the Recipient's civil service.

22. "Indigenous Peoples" means the social groups that have a distinct social andcultural identity, and that are susceptible to being disadvantaged in thedevelopment process induced by the Project or any part thereof.

23. "Japan Policy and Human Resources Development Fund" means the fundestablished in 1990 as a partnership between Japan and the World Bank for thepurposes of financing technical assistance in respect of, inter alia, theformulation and implementation of World Bank-supported projects andprograms.

24. "MPWT" means the Recipient's Ministry of Public Works and Transport, or anysuccessor thereto.

25. "National Road Safety Strategy and Action Plan" means the Recipient's nationalroad safety program (2011-2020) prepared by the Ministry of Public Works andTransport in December 2010, including its subsequent updates as of the date ofthis Agreement.

26. "National Roads" means (i) the National Road 1B, from Pak Noy to Ban Yo,located in Phongsali Province; and (ii) the National Road 6A, from Sop Bao toBan Dan, located in Houaphan Province, and the term "National Road" meansany of the National Roads.

27. "National Transport Strategic Plan" means the Recipient's Strategic Plan forTransport Sector Development (2011-2015).

28. "OPWTs" means the Offices of Public Works and Transport at the district level,or any successors thereto, and "OPWT" means any of the Offices of PublicWorks and Transport.

29. "Original Financing Agreement" means the Financing Agreement for the RoadSector Project between the Recipient and the Association dated April 2, 2010 asamended on January 30, 2012 (Grant H547-LA).

30. "Procurement Guidelines" means the "Guidelines: Procurement of Goods, Worksand Non-consulting Services under IBRD Loans and IDA Credits and Grants byWorld Bank Borrowers" dated January 2011.

31. "Procurement Plan" means the Recipient's procurement plan for the Project,dated June 4, 2012 and referred to in paragraph 1.16 of the ProcurementGuidelines and paragraph 1.24 of the Consultant Guidelines, as the same shall beupdated from time to time in accordance with the provisions of said paragraphs.

32. "Resettlement Action Plans" and "RAPs" mean, collectively, the two (2)Recipient's action plans for the compensation, resettlement and rehabilitation ofDisplaced Persons, all dated August 17, 2009, acceptable to the Association,

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prepared pursuant to the RPF; as such plans may be amended from time to timewith the prior written approval of the Association.

33. "Resettlement Policy Framework" and "RPF" mean the Recipient's ResettlementPolicy Framework, a policy framework for land acquisition, compensation,resettlement and rehabilitation of potentially Displaced Persons dated January 29,2009, and updated on April 3,2012, such RPF describing specifically: (a) Projectdescription and design criteria to be applied to activities to be prepared andundertaken during Project implementation and which may trigger involuntaryresettlement; (b) principles and objectives governing resettlement preparation andimplementation; (c) description of the process for preparing and approvingresettlement plans; (d) eligibility criteria for defining the various categories ofDisplaced Persons; (e) applicable legal framework; (f) methods of valuingaffected assets; (g) organizational procedures for delivery of entitlements andimplementation processes; (h) mechanisms for consultations with, andparticipation of, Displaced Persons in planning and implementation;(i) monitoring arrangements; and 0) grievance redress mechanisms.

34. "River Ma (Nam Ma)" means the Nam Ma in Houaphan Province in theRecipient's territory.

35. "Road Maintenance Fund Advisory Board" means the advisory board establishedby the Recipient pursuant to Decree No. 05/PM dated January 15, 2001, andreferred to in Section I.A, paragraph 1 of Schedule 2 to this Agreement.

36. "RMF" means the Road Maintenance Fund established by the Recipient's DecreeNo. 09,PM dated January 15, 2001, to finance road maintenance through roaduser charges.

37. "SGDR" means the Safeguard Diagnostic Review, including:

(a) a review of: (i) the Recipient's Environmental Legislation, conducted by theAssociation in cooperation with the Recipient in order to determine theequivalency of such legislation with the Association's relevant safeguardpolicies and guidelines, and (ii) the acceptability of the Recipient's capacity andtrack record in implementing its Environmental Legislation; and

(b) the definition of additional measures needed to ensure such equivalency;

such review having been disclosed: (i) originally in Lao PDR on December 15,2009 and on the World Bank InfoShop on December 16, 2009; and (ii) in LaoPDR on April 20, 2012 and on the World Bank InfoShop on April 22, 2012.

38. "Training and Workshop" means training and study tours conducted in theterritory of the Recipient and abroad, including purchase and publication of

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materials, rental of facilities, courses fees, and travel, accommodation andsubsistence of trainees.